Do your children understand why you work so hard?

Have you started to regret having to work so hard to build your empire and wish you had more time to spend with your children (or even your grandchildren)? While it is true that making money is difficult and needs your full attention, surely the real reason you are in business is to provide for your family and your future, isn’t it?

That’s why it’s really important to make the right decisions to keep hold of your hard earned cash, retain funds in your business and release them at the right time. So your spouse, your children (and even your grandchildren) thrive and reap the rewards of all the hard work you put in, and you get to work smarter, remember why you are doing it and use your precious time wisely.

You will need to consider when to …
1. Sell your business or handover to your successor (takes up to three years to do properly, and doing it badly can cost you thousands).

If you plan to sell your business you will need to take action three years or more in advance to show a good level of profit in your profit and loss account and build up the value of assets in the balance sheet to maximise the sales price.

On the other hand, if you plan to handover your business to a successor, you will need to plan carefully to ensure a successful handover and minimise the tax implications.

When you transfer your assets to your sons (or daughters), there are normally three taxes to consider; Capital Gains Tax (CGT), Capital Acquisitions Tax (CAT) and Stamp Duty (SD). While these taxes can be triggered on succession, there are currently some very generous reliefs, that are available which may allow you to transfer your assets to the next generation efficiently and at a reduced tax cost. Current Irish tax legislation, subject to certain conditions, allows individuals over 55 to dispose of shares in their business, valued at up to €750,000, tax free. This relief is known as retirement relief, although there is no actual requirement on the individual to retire from the business. The legislation provides even greater relief on the transfer of a business to your son (or daughter). The current available relief provides the ability to transfer a family business to your sons or daughters free from CGT provided the conditions for retirement relief are met, while at the same time allowing your sons or daughters the possibility of claiming business relief from CAT on 90% of the value of the transfer (provided shares / assets are held for at least 6 years post transfer).

Reduced asset values, brought about by the recession, now also provide a tax planning opportunity with regards to the tax efficient transfer of your assets. It makes sense to take advantage of the unprecedented fall in value of business and property related assets in order to pass such assets on to the next generation tax efficiently. Combining this lowering of values and the generous tax reliefs, means that there has never been a better time to consider succession planning.
The current landscape remains favourable to lifetime transfers of assets and in the main avoids the need for you or your children to dispose of family assets to pay tax liabilities generated by the natural succession process in a family business.

2. Maximise your pension and investments by Challenging the Charges

Did you know that your pension provider may be charging you as much as €60,000 on a Pension fund of €400,000 on retirement (according to a 2012 report from the Department of Social Protection). This means that for every Euro you put into your pension, your provider is grabbing 15p back.

On top of this the government is also grabbing .6p through the pension levy.

What can you do to keep more of your Personal Pension in your own hands?

Here are two of the most obvious ways …

1) Negotiate the deduction or charge on your contribution before your money is invested in your Pension fund. This charge can be as high as 5% and it is possible to get down to 0% with some providers. So for example if you are paying €500 per month into your Pension over 20 years with a 5% contribution charge, negotiating this charge to 0% can save you €6,000 over 20 years…..

2) Shop around for a better deal on the Annual Fund Management charges placed on your pension. This annual charge is placed on your pension by the Life Company / Pension Fund Manager irrespective of whether or not you are making or losing money. This rate can vary, but a range of 1% to 2% is not uncommon. The lower the annual management charge the better for your pocket. A small percentage saving may not seem like a means for making big savings but if you had a Pension fund valued at €200,000, a 0.5% annual fund management charge saving represents a saving of €1,000 in one year alone. If you multiply that out over 20 years you could achieve a potential €20,000 in savings, if not more…

3. Spread your Risk by Creating Multiple diverse sources of income.
The best way to secure a future where you thrive is to plan ahead and make sure that you have multiple sources of income. These may include your pension, investment in property, stocks and shares and other assets.
Your current financial situation may have developed over a long period of time and it’s sometimes difficult to keep on top of everything. By taking stock now you may be able to make a few key decisions that will make a big difference over the next few years.

Keep an eye on your inbox for the final article in this short series which will pull things together and recommend what action you need to take to secure your wealthy future. If you want to call and have a coffee and an informal chat, click here and fill in the simple form and Marie will call you back.